Preparing for the Fountain Wars

McDonald’s is preparing an aggressive summer promotion targeting core c-store customers.

Another month, another challenge for convenience store operators. Where is the legendary Charles Atlas when the big bad bully tries to kick sand in our collective faces?

As I’m sure you’ve heard by now this summer’s bully is, once again, McDonald’s. The hamburger chain had such obvious success stimulating its coffee sales chainwide that it is targeting convenience store customers, but this time it’s doing it with the soda fountain.

McDonald’s announced a summer-long fountain promotion that offers any size Coke product for just $1. You just have to believe that if they could get customers to upgrade their morning coffee fix during a stalled economy that they will certainly be able to grow their fountain business in the summer, especially as some economists are predicting a sharp uptick in retail sales.

Protecting Sales
It won’t do us any good to pout, shout or ignore this new competition. It’s here, it’s real and, if we play our cards right, there is an opportunity for us to actually grow fountain sales, instead of conceding sales in this misunderstood, undervalued, often ignored category. As many industry leaders have already learned, the fountain can be an extremely lucrative destination for convenience stores. Consider the following:

• As it did with coffee, McDonald’s will do a massive amount of advertising and raise consumer awareness on fountain drinks. Smart convenience store owners will use that awareness to create similar programs to convert McDonald’s customers to loyal c-store customers. Give them a taste of your foodservice program, but remember any customer could be trying your food for the first time. Make sure your foodservice program is properly executed and always fresh.
• McDonald’s, along with other QSRs, dominate breakfast and lunch category sales, but, in my mind, convenience owns the day’s fourth meal—the afternoon snack! This is what McDonald’s is after (they are also growing a fresh cookie program to build sales in this daypart) and this is what we can’t let them have.  Constantly bundle a fountain drink with a Snickers bar, Reese’s, or fresh-made cookie. Another option is to have a healthy offering from Kellogg’s, Little Debbie or Nabisco. McDonald’s simply cannot match the great array of snacks that we have to offer. If you bundle it, they will come. Do you really think any of our industry’s key vendors wants their customers choosing McDonald’s? It is indeed time to start looking for deals and asking for them when one cannot be found.
• Many of us are fortunate to be able to offer both Coke and Pepsi in our soda fountains. McDonald’s will only be offering Coke. That presents an opportunity. Pepsi’s Mountain Dew is one of the most popular carbonated soft drinks in the U.S. Exploit that huge advantage. Pepsi will jump at a chance to stay in this summer’s fountain game. But you have to ask in order to receive.
• Another point to consider is that McDonald’s largest fountain drink is 32 ounces. Many, if not all of us, offer a 44-ounce fountain drink. I personally will sell and advertise the 44-ounce fountain cup all summer long at 99 cents and still realize a strong gross margin. You might choose to offer the 44-ounce drink at $1.19 and advertise, “We give you 12 ounces more than McDonald’s.”
• Finally, while McDonald’s has milkshakes, lattes, frappachinos and fountain  drinks, they do not have a true frozen “cool you down quickly drink” like Slush Puppie, Slurpee or Arctic Blast like we do. This is just one more point of differentiation for us to go to battle with.

There are so many things that truly make convenience stores America’s destination. Let’s keep enhancing our offering and keep the bully on the run.

Jim Callahan has more than 40 years experience as a convenience store and petroleum marketer. His Convenience Store Solutions blog appears regularly on CSDecisions.com. He can be reached at (678) 485-4773 or via e-mail at jfcallahan502@msn.com.

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